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Categorized | Banks

ING to cut more than 5,000 jobs

Posted on October 3, 2016

A pedestrian holds an umbrella as he walks past the logo of ING bank by the group's main office in Brussels, Belgium, October 3, 2016. REUTERS/Francois Lenoir©Reuters

Dutch bank ING announced a significant scaling back of its branch network in Belgium and the Netherlands on Monday, with the loss of more than 5,000 jobs, giving a stark warning of the challenges facing the industry.

In a move that came under immediate fire from trade unions, the bank said it would halve its number of branches in Belgium, blaming the measure on low interest rates, “strict regulation” and the rise of online competitors.

    The lender said that the equivalent of 3,150 full-time jobs will be lost in Belgium by 2021, close to a third of the total in the country. The bank said that more than half of this may need to be met through compulsory redundancies.

    In the Netherlands, 2,300 jobs are to be shed, equivalent to about 15 per cent of full-time staff.

    Rik Vandenberghe, chief executive of the bank’s Belgian arm, said on Monday that the decision was “a shock for a lot of people . . . it was not an easy decision, I have not slept well these last days.”

    Monday’s announcement follows years of restructuring measures at ING, which was propped up with a €10bn capital injection from the Dutch state at the height of the 2008 financial crisis.

    The lender, which is based in Amsterdam, is one of the leading retail banking groups in Belgium and the Netherlands and was the fourth-largest eurozone bank by market capitalisation in 2014. It is regularly ranked by regulators as one of the most systemically important financial institutions in the world and is active in more than 40 countries.

    ING presented the job losses in Belgium and the Netherlands as being part of its awkwardly named “Think Forward” strategy aimed at digitising more of the group’s operations.

    The programme is meant to deliver €900m in annual cost savings by 2021, and has a focus on improving the online services it offers its clients. In a sign of the transformative forces at work in banking, the Belgian press release on the job cuts namechecks Spotify, Netflix and Google as inspirations for the lender’s future direction.

    At the same time, Ralph Hamers, the chief executive of ING Group, placed part of the responsibility for the job cuts on current challenges.

    “Banks are confronted with continuous regulatory burden and a prolonged period of ultra-low interest rates,” he said. “These factors put pressure on the returns which are necessary to fund growth and investments, and cover the cost of our capital.”

    Belgium this year experienced one of the most extreme phenomena linked to the low-interest rate environment, namely homeowners getting negative interest rates on their mortgages.

    The country’s broadcaster RTBF reported in July that several thousand borrowers were no longer paying any interest on their floating-rate mortgages, while a smaller number had negative rates, meaning they were receiving monthly payments from their bank on the borrowed money.

    ING’s move is the third financial sector restructuring announced in Belgium in recent weeks, following the confirmation of planned job cuts at insurers Axa Belgium and P&V. The Dutch bank will close 600 of the 1,250 branches that it, and its subsidiary Record Bank, collectively have in Belgium.

    Mr Hamers said that the bank is setting aside €1.1bn to cover redundancy costs in Belgium and the Netherlands, which will bear the brunt of more than 7,000 job cuts worldwide. Worldwide, ING employs more than 52,000 people,

    Kris Peeters, Belgium’s employment minister, on Monday urged the country’s banks to consider setting up a solidarity fund to compensate those who lose their jobs.